How HR departments are built in a growing company

Any organisation, after a certain stage, feels the need to establish a strong HR department, which can further handle all the HR processes of the firm. At the start, when a company has a small bunch of people working in the organisation, all the HR processes — which majorly include talent acquisition, that is, hiring and payroll — are carried out by general managers of the company who end up wearing multiple hats. In many cases, these HR processes are carried out by the CEOs or promoters themselves. However, when the company reaches a certain level, it becomes difficult for the general managers to look into each and every process. Therefore a need to hire an HR manager arises — someone with four to five years of experience and capable of handling multiple processes in the HR department. When exactly is the right time to hire that full-time HR manager? Well, if we look at the traditional ratio, for every 200 employees, we need one HR manager. In certain sectors, this ratio can change to 100:1 depending upon the nature of work and growth trajectory.

“The company culture should be built from day one. Why wait for the first 100 or 200 employees? With COVID coming into the picture, the need for an HR manager from the very start of the business has only grown”

Biplob Banerjee, CHRO, USV Pharma

Human resource leaders have different opinions on this though. While many believe this ratio/ formula is still followed and is very much applicable across companies, even in startups, others believe that hiring an HR professional at the very start is a much wiser decision, so that all HR processes are structured and run smoothly from the very beginning. “The company culture should be built from day one. Why wait for the first 100 or 200 employees? With COVID coming into the picture, the need for an HR manager from the very start of the business has only grown,” believes Biplob Banerjee, CHRO, USV Pharma.

“It is like first constructing an airport and erecting the air-traffic controller later. While few flights are able to take off and land, there is a severe catastrophe just waiting to happen,” cautions Banerjee.

There is a difference between establishing an HR department for a big conglomerate entering a new sector on the one hand, and a startup on the other. Anil Mohanty, head of people, Medikabazaar, has experienced both the scenarios. Mohanty, who was earlier the HR head at Reliance Jio infocomm, established by Reliance Industries as a new brand in the telecom sector, later joined Medikabazaar, which is a growing e-commerce startup.

A company establishing a new brand will have its plans already set. It will have an HR department in place from the start, because it has all the growth plans laid out. There is no dearth of funds in this case. Also, big conglomerates will already have a set model of building an HR department, but startups — which are relatively new — may not have this privilege.

“If the company is growing, it will definitely need to hire more and more people, which will eventually decide how many HR professionals one will require at what stage of the business cycle”

Varun Upadhyaya, group HR head, Wockhardt

As described by Mohanty, startups generally have a very small team, such as four to five core members. For them, getting funds is the first priority and only after that do they think about setting up an HR department or a team, depending on the business size and the growth plans. “When I joined Medikabazaar, I was given a clear mandate for the first five years — that we want to grow teams and expand as much as possible,” shares Mohanty.

Varun Upadhyaya, group HR head, Wockhardt, also believes that the need for an HR department will depend on the growth and size of the company. “If the company is growing, it will definitely need to hire more and more people, which will eventually decide how many HR professionals one will require at what stage of the business cycle,” explains Upadhyaya.

In fact, Mohanty asserts that in case of startups, once the promoters have the fund backup, they will accordingly start thinking about growing teams and the business.

There are also subdomains in the HR department, such as payroll, employee engagement, talent management and so on. Generally, these teams grow with the number of employees. Talent acquisition and payroll being the basic needs from the start, HR leaders feel it is better to have a specialised professional capable of handling this role strategically, from the beginning itself. Other roles, such as employee engagement, come into the picture only when one has very large teams working in different locations. Learning and Development (L&D) is also a very strategic function. As businesses need new skills to sustain or grow, they can look to hire specialised professionals in this domain. There is no correct time to do so. It all depends on the needs of the business and the sector. There will be some niche sectors, where there is dearth of skills and ready-made talent, and then there will be sectors where talent and skill are ample but there is a lot of competition.

“Startups generally have a very small team, such as four to five core members. For them, getting funds is the first priority and only after that do they think about setting up an HR department or a team, depending on the business size and the growth plans”

Anil Mohanty, head of people, Medikabazaar

Another question that arises is, ‘When to hire a CHRO or a head of HR?’ Many HR leaders are of the opinion that one needs a mature HR lead from the very start. Mohanty shares that it all depends on how fast the company is growing or wants to grow in the next five to 10 years. “When one hires an HR head from a known brand or a company, it actually gives a very strong message to people that the company has the intention to grow, hire talent and build teams in the near future. It gives a positive boost to the employer brand of the company,” points out Mohanty.

“In fact, the hired HR heads help the company build the employer value proposition of the company. That helps people understand why they should join the firm,” enunciates Mohanty.

It is best for any firm to have an HR manager from the very beginning. It helps build the foundation of all HR processes from the start. Later, the company can look to hire more people in the specialised HR roles, according to the needs of the business and the size of the team.